Legislature(2015 - 2016)HOUSE FINANCE 519

01/29/2016 01:30 PM House FINANCE

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01:32:21 PM Start
01:33:00 PM Fy 17 Budget Overview: Department of Environmental Conservation
02:34:12 PM Fy 17 Budget Overview: Department of Labor and Workforce Development
03:27:39 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Scheduled but Not Heard
Scheduled but Not Heard
Scheduled but Not Heard
+ FY17 Budget Overviews: TELECONFERENCED
- Dept. of Environmental Conservation
- Dept. of Labor & Workforce Development
                  HOUSE FINANCE COMMITTEE                                                                                       
                     January 29, 2016                                                                                           
                         1:32 p.m.                                                                                              
1:32:21 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Neuman  called the  House Finance Committee  meeting                                                                   
to order at 1:32 p.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Mark Neuman, Co-Chair                                                                                            
Representative Dan Saddler, Vice-Chair                                                                                          
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Lynn Gattis                                                                                                      
Representative Scott Kawasaki                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Lance Pruitt                                                                                                     
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
Representative Steve Thompson, Co-Chair                                                                                         
Representative David Guttenberg                                                                                                 
ALSO PRESENT                                                                                                                  
Larry  Hartig,  Commissioner,   Department  of  Environmental                                                                   
Conservation;   Thomas   Cherian,   Director,   Division   of                                                                   
Administrative   Services,   Department    of   Environmental                                                                   
Conservation;  Heidi  Drygas,   Commissioner,  Department  of                                                                   
Labor and  Workforce Development;  Paloma Harbour,  Director,                                                                   
Division  of  Administrative Services,  Department  of  Labor                                                                   
and Workforce Development; Representative Cathy Tilton.                                                                         
FY 17 Budget Overviews:                                                                                                         
         Department of Environmental Conservation                                                                               
          Department of Labor and Workforce Development                                                                         
Co-Chair Neuman discussed the meeting agenda.                                                                                   
^FY   17  BUDGET   OVERVIEW:   DEPARTMENT  OF   ENVIRONMENTAL                                                                 
1:33:00 PM                                                                                                                    
LARRY  HARTIG,  COMMISSIONER,   DEPARTMENT  OF  ENVIRONMENTAL                                                                   
CONSERVATION  (DEC),   provided  a  PowerPoint   presentation                                                                   
titled  "Department  of  Environmental   Conservation,  House                                                                   
Finance Committee" dated January 29, 2016 (copy on file).                                                                       
Co-Chair  Neuman asked  members to hold  questions until  the                                                                   
end of the presentation.                                                                                                        
Commissioner  Hartig highlighted  that DEC's  mission  was to                                                                   
protect  human health  and  the  environment  (slide 2);  the                                                                   
department  saw  the two  items  as inextricably  linked.  He                                                                   
addressed outcomes the department was aiming for (slide 3):                                                                     
     · Clean water, healthy air, and good management of                                                                         
        hazardous materials and waste                                                                                           
     · Safe drinking water and sanitary waste disposal                                                                          
     · Food safe to eat                                                                                                         
     · Low risk of spills and efficient, effective response                                                                     
        when spills occur                                                                                                       
     · Wise resource development for a growing state                                                                            
Commissioner Hartig  elaborated on slide 3. He  detailed that                                                                   
outcomes  ensured safe  drinking  water  without worry  about                                                                   
things like  lead contamination  that had occurred  in Flint,                                                                   
Michigan.  He furthered  that outcomes  also meant  residents                                                                   
could put  their garbage  out without  being concerned  about                                                                   
where  it would  go and  could  drive to  work without  worry                                                                   
about air quality.  He noted that there was  significant work                                                                   
that happened  behind the scenes  that DEC and others  did to                                                                   
ensure the items  were provided. He addressed  slide 4 titled                                                                   
     · Science-based standards                                                                                                  
     · Permits and authorizations incorporating these                                                                           
     · Monitoring, outreach, compliance assistance, and                                                                         
     · Emergency response and oversight of spill clean-up                                                                       
     · Meaningful and effective public processes for                                                                            
        developing standards and permits                                                                                        
     · Technical    assistance,   grants,    and   loans   to                                                                   
        communities for drinking water and wastewater                                                                           
Commissioner  Hartig elaborated  on the  topic of  monitoring                                                                   
on slide  4. He provided  a recent  example about  the excess                                                                   
arsenic  in the  Talkeetna water  system.  He explained  that                                                                   
the issue was  brought to DEC's attention immediately  due to                                                                   
regular reports  provided to  the department. The  department                                                                   
had  samples tested  and  was able  to  alert communities  if                                                                   
numbers were higher  than normal. The department  then worked                                                                   
with  communities to  correct  the problem  and notified  the                                                                   
public if  there was  a delay resolving  the issue.  He added                                                                   
it  happened with  some  regularity.  He spoke  to  emergency                                                                   
response  provided by the  department.  For example,  DEC had                                                                   
recently  responded   to  a   truck  spill  containing   some                                                                   
hazardous  chemicals.  He continued  addressing  slide 4  and                                                                   
relayed  that  DEC  managed  a   couple  of  loan  and  grant                                                                   
programs  that  provided  water   and  sewer  to  communities                                                                   
statewide.  He briefly  highlighted  an organizational  chart                                                                   
on  slide  5  that  included  the  commissioner,  one  deputy                                                                   
commissioner, and five divisions.                                                                                               
Commissioner    Hartig    addressed     the    Division    of                                                                   
Administration on  slide 6. The division was  directed by Tom                                                                   
Cherian  and provided  administrative  services,  information                                                                   
technology,  financial,  budget,  procurement,  and  building                                                                   
management.  The  division  also   housed  the  Environmental                                                                   
Crime Unit; the  unit employed two staff and  was independent                                                                   
of  the  commissioner's  office  and  of the  programs  -  it                                                                   
operated   across   the  programs   with   independence.   He                                                                   
explained  that  the  unit  met  with  the  commissioner  and                                                                   
division  director  at least  once  a month  to  go over  the                                                                   
status of  all of  its cases;  the commissioner and  director                                                                   
could provide direction if they chose to.                                                                                       
1:37:11 PM                                                                                                                    
Commissioner Hartig  discussed the Division  of Environmental                                                                   
Health on  slide 7. He relayed  that it was  the department's                                                                   
largest  division and was  currently  without a director.  He                                                                   
noted that  the prior director  had retired the  past summer;                                                                   
the department  was in the process  of revisiting all  of the                                                                   
work done by  the division to determine if  some efficiencies                                                                   
and  consolidation could  occur. The  division included  food                                                                   
safety  and sanitation,  laboratory  services (including  the                                                                   
environmental  health   lab  where  the   state  veterinarian                                                                   
resided), public  drinking water  systems (e.g.  oversight of                                                                   
the  Talkeetna  water  plant he  referred  to  earlier),  and                                                                   
solid   waste    management   (landfills    for   communities                                                                   
Commissioner  Hartig  addressed  that  the  Division  of  Air                                                                   
Quality was the  department's smallest division  (slide 8). A                                                                   
federally   delegated   program    issued   Clean   Air   Act                                                                   
construction   and  operating  permits   in  the   state.  He                                                                   
explained that  the program  had run for  over 30 years  by a                                                                   
very experienced  group. He  shared that  earlier in  the day                                                                   
he had  been involved  in an exercise  reviewing the  state's                                                                   
air   quality   permitting  program;   the   consultant   had                                                                   
communicated  that  the  department  may  see  a  15  percent                                                                   
improvement resulting  from some changes it  was considering.                                                                   
The   consultant   had  communicated   that   typically   the                                                                   
improvement  was closer  to 50  to 80  percent; however,  the                                                                   
state's program  was already  operating very efficiently.  He                                                                   
noted  that although  the  division was  small,  it was  very                                                                   
effective. The division  also did a fair amount  of community                                                                   
work, particularly  related to  transportation. He  mentioned                                                                   
Anchorage  and Fairbanks  and explained  that the  department                                                                   
received   some    funding   through   the    Department   of                                                                   
Transportation  and  Public  Facilities  to work  with  local                                                                   
communities on transportation  plans to ensure  the plans did                                                                   
not impact  air quality in  negative ways. The  division also                                                                   
did some limited  air monitoring around the  state, primarily                                                                   
for Environmental  Protection Act (EPA) requirements  and for                                                                   
forest   fires.  He   elaborated  that   DEC  supported   the                                                                   
Department  of Natural  Resources and  other agencies  in air                                                                   
monitoring and  issuing air alerts  relating to  human health                                                                   
concerns associated with forest fires.                                                                                          
1:39:42 PM                                                                                                                    
Commissioner  Hartig  moved on  to  discuss the  Division  of                                                                   
Spill  Prevention and  Response  (SPAR)  directed by  Kristin                                                                   
Ryan  (slide  9).  He  highlighted   that  the  division  had                                                                   
consolidated  several of  its programs  over the past  couple                                                                   
of  years and  had  been  working towards  efficiencies.  The                                                                   
division   provided   spill  prevention   and   response,   a                                                                   
contaminated  sites  cleanup program,  and  administered  the                                                                   
Response  Fund.  He detailed  that  the fund  had  previously                                                                   
been funded  by a  $0.05 per barrel  surcharge on  crude oil,                                                                   
but 2015 legislation  had included 0.95 percent  surcharge on                                                                   
refined products as well.                                                                                                       
Commissioner   Hartig  addressed   the   Division  of   Water                                                                   
directed   by  Michelle   Hale  (slide   10).  The   division                                                                   
contained  two  parts,  the  first   involved  setting  water                                                                   
quality  standards  and  incorporating   the  standards  into                                                                   
permits.  He   expounded  that  the  division   included  the                                                                   
federally   delegated   Alaska    Pollution   and   Discharge                                                                   
Elimination System  program, which  was based on  the federal                                                                   
Clean Water Act.  The second part of the division  focused on                                                                   
facility  construction   that  made   loans  and   grants  to                                                                   
communities  of all sizes  in order to  fund water  and sewer                                                                   
work. Facility  construction included the Village  Safe Water                                                                   
Program  for communities  of  1,000  or fewer  residents  (75                                                                   
percent  of the money  was federal  with a  25 percent  state                                                                   
match from the  capital budget) and the Municipal  Grants and                                                                   
Loan Program  that provided state  funds (with a  local match                                                                   
depending  on  the   community  size).  He  noted   that  the                                                                   
department  was not  requesting  any new  money,  but it  was                                                                   
requesting a  reappropriation of  some leftover  funding from                                                                   
completed  projects.  He  explained   that  states  had  been                                                                   
receiving federal  money annually for  many years to  loan to                                                                   
their communities  at favorable rates (the fund  source was a                                                                   
large  percentage  of  funds   for  water  and  sewer  plants                                                                   
nationwide). He  furthered that a  portion of the  amount was                                                                   
required to  be forgiven under  federal law;  therefore, each                                                                   
year the  department requested  a small  capital request  for                                                                   
the   forgiveness  portion.   He  spoke   to  the   shrinking                                                                   
Municipal  Grant  and  Loan program,  which  had  caused  the                                                                   
department  to  consider whether  there  would  be  a gap  in                                                                   
funding  for  communities  if   the  funding  was  no  longer                                                                   
available  in  the  future. The  department  was  working  to                                                                   
determine whether  the existing  revolving loan  fund program                                                                   
would be sufficient  to cover all needs throughout  the state                                                                   
or whether a gap would occur.                                                                                                   
1:42:38 PM                                                                                                                    
Commissioner Hartig  addressed the department's  FY 17 budget                                                                   
request   on   slide   11.   The    department   budget   was                                                                   
approximately  $84  million,  which  included  $17.7  million                                                                   
Unrestricted General  Fund (UGF) -  based on UGF  funding DEC                                                                   
was the smallest  of the state's departments. A  pie chart on                                                                   
slide  11  showed  the  various  fund  sources  including  28                                                                   
percent  federal  receipts,  19   percent  of  the  allocated                                                                   
Designated General  Funds went to the Response  Fund (funding                                                                   
derived  from the  $0.05 surcharge  on  crude oil  production                                                                   
and $0.95  [$0.0095] per  barrel on  refined products,  which                                                                   
was  projected   to  bring   in  about   $7.2  million)   [an                                                                   
additional 15  percent DGF went  to other purposes],  and UGF                                                                   
accounted for 21 percent of the DEC request.                                                                                    
Commissioner  Hartig  moved  to  slide  12  titled  "FY  2017                                                                   
Budget Request  by Division."  He stressed the  importance of                                                                   
the  information  and  addressed   the  cuts  the  state  was                                                                   
facing.  The chart helped  identify where  UGF was  allocated                                                                   
within the  department. He began  with SPAR and  relayed that                                                                   
if the  legislature accepted  the governor's  proposed  FY 17                                                                   
operating  budget there  would  be no  UGF  remaining in  the                                                                   
division. He  noted that currently  there was  about $400,000                                                                   
UGF remaining  in  the division,  which was  the last  bit of                                                                   
UGF   funding  going   towards   the  department's   Pipeline                                                                   
Corrosion  and Integrity  Program that  had been  established                                                                   
in  2006.  He  furthered  that  the  Response  Fund  was  now                                                                   
sustainable  and  the  department  was  proposing  using  the                                                                   
remaining UGF to fund the three corrosion engineers.                                                                            
Commissioner  Hartig referred  to  the  bar representing  the                                                                   
Air Quality  Division, which used  a small amount of  UGF. He                                                                   
explained  that  the  division  was small  in  size  and  its                                                                   
largest  function  was  issuing  permits  under  the  federal                                                                   
Clean  Air  Act,  which  required the  program  to  be  "fee-                                                                   
supported." He  elaborated that  it was possible  because the                                                                   
permittees were  larger facilities  with the capacity  to pay                                                                   
larger  permit  fees (the  method  would  not work  in  other                                                                   
programs,  which would  require  UGF subsidy).  He  continued                                                                   
that  the UGF  in  the Air  Quality program  was  essentially                                                                   
federal match  money; it  was the minimum  needed to  run the                                                                   
division  including a  permitting program,  bring in  federal                                                                   
funds,  and collect  fees  associated  with the  permits.  He                                                                   
stated that it  would be difficult to reduce any  more UGF in                                                                   
the Air  Quality Division.  He relayed  that they  had really                                                                   
leaned the division down to drive it towards efficiencies.                                                                      
1:46:29 PM                                                                                                                    
Commissioner Hartig  continued to address slide  12. He spoke                                                                   
to  the UGF  component  of  the Division  of  Administration,                                                                   
which   was  similar   to  any   other  government   division                                                                   
including   information  technology   and  procurement.   The                                                                   
remaining  divisions  with UGF  available  for  consideration                                                                   
(total requested  UGF was $17.7  million for FY 17)  were the                                                                   
Division  of   Environmental  Health  and  Division   of  Air                                                                   
Quality.  He  moved  to slide  13  titled  "Budget  Reduction                                                                   
Criteria." He shared  that the budget reduction  scenario had                                                                   
begun in 2014  at DEC; the department had  started looking at                                                                   
the  declining oil  production at  that time  because it  was                                                                   
impacting  SPAR.  He reminded  the  committee  that SPAR  was                                                                   
largely funded by  the prevention account, which  in 2014 had                                                                   
only  been funded  by  a 5  percent  surcharge  on crude  oil                                                                   
production.  He detailed  that  as crude  oil production  had                                                                   
declined, the  division saw its funding  source disappearing.                                                                   
He elaborated that  the division had given  up about $500,000                                                                   
in DGF  (the prevention account)  in order to lower  its draw                                                                   
on  the  prevention   account  and  extend  the   funds.  The                                                                   
department had  started developing criteria to  determine how                                                                   
to approach  additional cuts in  a systematic  and thoughtful                                                                   
way (slide 13)  and had started discussing  the criteria with                                                                   
its  House   Finance  subcommittee  in  2015.   The  criteria                                                                   
focused  on  preserving  core  services  that  could  not  be                                                                   
undertaken  by the federal  government  or other agency.  The                                                                   
criteria  also considered  functions  the state  had a  long-                                                                   
term investment in  that would not be retrieved  if they were                                                                   
given  up. He  considered the  department's large  permitting                                                                   
programs like the  air permitting program it had  for over 30                                                                   
years  and  its APDS  program.  He  stated that  the  federal                                                                   
government was  no longer set  up to handle the  programs and                                                                   
by the time  the federal government  was able to take  on the                                                                   
work in 5 to  10 years, the state would have  lost all of its                                                                   
experience  in  the areas.  He  reasoned  that if  the  state                                                                   
decided it wanted  the programs back it would be  close to 20                                                                   
years before it would get them.                                                                                                 
1:49:20 PM                                                                                                                    
Commissioner Hartig  addressed existing budget  conditions on                                                                   
slide  14.  He  reiterated his  earlier  testimony  that  the                                                                   
department had  started tightening  the SPAR budget  in 2014.                                                                   
The  department had  taken a  $1.4 million  reduction in  its                                                                   
Division  of  Water. He  detailed  that  the state  had  been                                                                   
looking at  taking the Clean Water  Act 404 program,  but the                                                                   
legislature  had decided  not to continue  the effort,  which                                                                   
meant  giving up  5  positions  and $1.4  million  in FY  15.                                                                   
Additionally,  there had  been much higher  vacancy  rates in                                                                   
the  Division of  Water and  SPAR where  the department  knew                                                                   
there would  be reductions.  Rather than  continuing  to fill                                                                   
positions  as they  became vacant,  the  department had  left                                                                   
the positions  open, knowing that  they would not be  able to                                                                   
afford them  in the  near future, which  allowed them  to not                                                                   
lay  off  employees.  He  had   heard  discussions  that  the                                                                   
reductions were not  real because employees had  not been let                                                                   
go.  He explained  that the  department  had started  holding                                                                   
the positions  vacant to  prevent having  to fire  employees;                                                                   
it provided more flexibility in managing the situation.                                                                         
Commissioner  Hartig  continued  to address  existing  budget                                                                   
conditions  on slide 14.  He highlighted  that cuts  mandated                                                                   
by  the  legislature  began  in FY  16;  the  department  had                                                                   
reduced  UGF  by   10.6  percent.  The  department's   FY  17                                                                   
proposal  would  reduce  UGF  by  another  11.8  percent.  He                                                                   
relayed  that   factoring  in  cuts   to  UGF  and   DGF  the                                                                   
department's  budget had  been  reduced  by approximately  25                                                                   
percent. In  addition to  cuts passed  by the legislature  in                                                                   
FY 16, DEC could  not sustain its 10 authorized  positions in                                                                   
the  Division of  Water and  had  given them  up through  the                                                                   
management  plan.  He  noted  that there  had  also  been  an                                                                   
unallocated cut  in 2016 that  the department had  to absorb,                                                                   
which had added to the fair number of cuts.                                                                                     
1:52:12 PM                                                                                                                    
Commissioner Hartig  turned to slide 15 and  discussed budget                                                                   
reduction strategies.  The proposed  budget would  reduce UGF                                                                   
by  another  11.8  percent.  In addition  to  cuts,  DEC  was                                                                   
continually  looking at efficiencies  and reorganization;  it                                                                   
was  consolidating  some  programs and  eliminating  a  small                                                                   
program in  the FY 17 budget.  The department was  looking at                                                                   
combining  lease space,  which would likely  not occur  until                                                                   
FY  18. He  relayed  that  the  department had  two  statutes                                                                   
authorizing it  to collect fees  for services.  He elaborated                                                                   
that the  department was only  allowed to recoup some  of its                                                                   
direct  costs,  but not  its  indirect  costs.  Additionally,                                                                   
there were subsidies  required for certain  smaller companies                                                                   
(e.g. DEC  could not charge the  companies for travel  out to                                                                   
their   facility   and   other).  He   explained   that   the                                                                   
department's   look  at   fees  was   within  its   statutory                                                                   
confines; it  was not free to  just increase fees  on people.                                                                   
Any change  had to be done  through a fee study.  He detailed                                                                   
that as  stipulated in  statute, periodically the  department                                                                   
was allowed  to revisit its  fees and to consider  increasing                                                                   
them  to cover  more of  its direct  costs.  The Division  of                                                                   
Administrative  Services looked  through all  of the  data to                                                                   
determine whether  there was a justification  to increase the                                                                   
fee; if  the answer  was yes, the  department went  through a                                                                   
regulatory  process   notifying  the   public  and   set  the                                                                   
increase  by regulation.  The process  had just concluded  in                                                                   
the  Division  of   Air  Quality  and  DEC   was  looking  at                                                                   
implementing a  fairly modest  fee increase that  would begin                                                                   
with  the  next fiscal  year.  He  added  that DEC  was  just                                                                   
beginning fee studies in water and food safety programs.                                                                        
Commissioner Hartig  briefly highlighted that  the department                                                                   
planned to  continue along the same  path in FY 18  and would                                                                   
continue looking  for efficiencies  and consolidations  (i.e.                                                                   
consolidations to  leases and other)  in an effort  to reduce                                                                   
its UGF draw.                                                                                                                   
He  turned to  slide  16 and  addressed a  summary  of FY  17                                                                   
reductions.  He  pointed  to  the  elimination  of  a  shared                                                                   
office  assistant position  and  reduction in  administrative                                                                   
services  in the  department's Fairbanks  office. The  second                                                                   
reduction was  in Laboratory Services  at the Tudor  Road lab                                                                   
in  Anchorage, which  would replace  UGF  with increased  fee                                                                   
revenue.  The  third   reduction  was  in  the   Air  Quality                                                                   
Division; the  department was reclassifying  an environmental                                                                   
program specialist  position as a chemist, which  was a lower                                                                   
paid position.  Additionally,  it was  looking at moving  the                                                                   
work of several retirees to lower paid positions.                                                                               
1:56:23 PM                                                                                                                    
Commissioner Hartig  addressed slide  17 and spoke to  a fund                                                                   
source  change  in  SPAR  to   the  prevention  account.  Two                                                                   
corrosion engineers  currently funded by UGF,  would be moved                                                                   
over  to   DGF  Response   Fund  money.   He  spoke   to  the                                                                   
dissolution  of  the  Technical  Services  program  in  Water                                                                   
Quality. He  expounded that the  program had  provided public                                                                   
outreach and had  overseen the preparation of  new regulation                                                                   
packages for the  Water Quality Division and  had managed the                                                                   
information  technology  employees;  the  services  would  be                                                                   
absorbed  elsewhere   in  the  Division  of   Water  and  the                                                                   
positions  in   the  technical   service  program   would  be                                                                   
eliminated   (6   positions    and   about   $700,000   UGF).                                                                   
Additionally, there  would be a  fund source change  in Water                                                                   
Quality  to program  receipts  for increased  fee revenue  to                                                                   
generate increased DGF.                                                                                                         
Commissioner  Hartig  moved  to  slide 18  and  continued  to                                                                   
address  reductions. He  discussed a reduction  in the  Water                                                                   
Division  in Facility  Construction, which  would be  covered                                                                   
with  increased   fee  revenue   and  federal  receipts.   He                                                                   
referred  to the  unallocated  cut in  FY  16 and  FY 17.  He                                                                   
explained  that originally  the department  had been  waiting                                                                   
on the results  of the labor negotiations to  determine if it                                                                   
could produce enough  savings to absorb the  unallocated cut;                                                                   
however, the  timing was not  working out and  the department                                                                   
had been directed  to identify the exact cuts.  The cut would                                                                   
amount  to  the   reduction  of  4  PCNs   [position  control                                                                   
numbers]  that would  be  identified in  the  next month.  He                                                                   
briefly  highlighted  a table  showing  a  summary  of FY  17                                                                   
budget  changes.   The  table  indicated  a   reduction  from                                                                   
approximately  $20  million UGF  in  FY 16  to  approximately                                                                   
$17.7 million in FY 17.                                                                                                         
1:58:44 PM                                                                                                                    
Commissioner Hartig  moved to slide 20 titled  "What Alaskans                                                                   
Get for  Their Money."  The slide  illustrated that  it would                                                                   
cost state  workers $0.38  per day  for services provided  by                                                                   
DEC (i.e.  clean air to breathe,  clean water to  drink, safe                                                                   
food to eat,  clan land and waters, and  responsible resource                                                                   
development);  it would  cost $0.17  per day  if the  state's                                                                   
total population was factored in.                                                                                               
Commissioner  Hartig  addressed   how  DEC  spent  UGF  money                                                                   
(slide  21).  He detailed  that  $5  million was  a  required                                                                   
state match  for federal  grants. Additionally,  some  of the                                                                   
funds went  to the environmental  health lab,  Administrative                                                                   
Services, and the  Office of the Commissioner.  He elaborated                                                                   
that  about half  of the  UGF went  to subsidizing  fee-based                                                                   
programs  and towards taking  care of  things like  community                                                                   
complaints   and  working   with   communities  on   capacity                                                                   
building.  He  communicated  that some  of  the  department's                                                                   
programs  could carry  themselves  and others  could not.  He                                                                   
elaborated  that some  industries were  not at  a scale  that                                                                   
enabled  them  to  support  the  program  to  give  them  the                                                                   
permits they needed to operate.                                                                                                 
Commissioner  Hartig  included  a  list  of  the  departments                                                                   
federally  delegated  and not  federally  required  programs.                                                                   
Programs that  were not federally  required were  things that                                                                   
may be  handled by the local  government in some  states such                                                                   
as restaurant  inspections.  He detailed  that Anchorage  was                                                                   
the  only   city  doing   restaurant  inspections;   DEC  was                                                                   
expected to  do inspections in  Juneau, Fairbanks,  and other                                                                   
locations.  He  elaborated  that  it  was  unusual;  in  most                                                                   
states the  state government was  not involved  in restaurant                                                                   
inspections.  He furthered  that  rural Alaska  did not  have                                                                   
capacity to  run those types  of programs. He  explained that                                                                   
when DEC  sent an inspector out  to Nome to inspect  the fish                                                                   
processing   plant,  the   inspector  could   also  look   at                                                                   
restaurants, the school, and other food establishments.                                                                         
2:01:42 PM                                                                                                                    
Commissioner Hartig  turned to slide 23 titled  "DEC Position                                                                   
History."   The  table  showed   the  department's   position                                                                   
history by  PCN count from FY  07 to FY 17. He  detailed that                                                                   
in FY  17 the number  of positions was  518, which  was about                                                                   
what it had  been 10 years earlier. He directed  attention to                                                                   
the significant  drop in positions  between FY 15 and  FY 16.                                                                   
Slide 24 included  a summary of unallocated  reductions taken                                                                   
in FY 16. The  bulk of the reduction was associated  with the                                                                   
elimination  of  two  engineer   positions  in  the  Pipeline                                                                   
Integrity and  Engineering section of SPAR.  Other reductions                                                                   
were  associated  with  a fund  switch  and  efficiencies  in                                                                   
Administrative Services and the Division of Air Quality.                                                                        
Commissioner Hartig  turned to slide 25 and  relayed that the                                                                   
department  may submit  a FY 16  supplemental budget  request                                                                   
because it  may receive  additional federal Diesel  Emissions                                                                   
Reduction Act grant  money; the money would  flow through DEC                                                                   
to  communities  for some  new  diesel generators  that  were                                                                   
needed. Money coming  into the Division of Air  Quality was a                                                                   
bit  unpredictable.  The department  was  considering  asking                                                                   
for  an  increment  for  $250,000   federal  authority  going                                                                   
forward to be  able to absorb the changes.  Slide 26 included                                                                   
performance  measures.  A  table  at  the top  of  the  slide                                                                   
indicated that the  department was staying pretty  up to date                                                                   
on  permits issued.  He elaborated  that  most permits  under                                                                   
federal and  state law had to  be reissued every  five years.                                                                   
He  explained  that it  was  important  because many  of  the                                                                   
facilities  changed their  operations in  ways that  required                                                                   
permit  modifications. A  table on  the bottom  of the  slide                                                                   
showed village homes  served by safe water. He  pointed out a                                                                   
dip  in the  bar  [around  2013].  He explained  the  biggest                                                                   
reason  was  related  to  a  different   way  of  accounting;                                                                   
therefore,   he  did  not   know  how   real  the   dip  was.                                                                   
Additionally, the  department had  slowed down taking  on new                                                                   
projects  while determining  if  there was  a  better way  of                                                                   
spending the  money to  make it  more sustainable,  which had                                                                   
resulted in a pause.                                                                                                            
2:04:40 PM                                                                                                                    
Co-Chair Neuman  noted that  Representative Cathy  Tilton was                                                                   
present in the room.                                                                                                            
Representative Gara  spoke to 11 percent cuts  in the current                                                                   
year,  10.8 percent  the last  year, and 5  percent the  year                                                                   
before.  He wondered  what would  be left  of the agency.  He                                                                   
relayed  that after  the BP  oil  spill on  the North  Slope,                                                                   
former Governor  Sarah  Palin had started  a pipeline  safety                                                                   
and  integrity  office  with   the  goal  of  preventing  the                                                                   
occurrence  of another  spill on  the North  Slope. He  asked                                                                   
how effective  the agency had  been and how effective  it was                                                                   
at  the current  level of  staffing. He  queried the  current                                                                   
level of staffing compared to its initial level.                                                                                
Commissioner Hartig  replied that in 2006 there  had been two                                                                   
pipeline  spills  on the  North  Slope from  BP's  facilities                                                                   
from  three-phase pipelines.  He detailed  that the  specific                                                                   
pipelines ran from  wellheads to the processing  center where                                                                   
the  gas and  water  was removed  and  oil  was prepared  for                                                                   
sending  to  pump  station  1  and  then  on  to  Valdez.  He                                                                   
elaborated   that  the   pipes  were   older,  smaller   (not                                                                   
piggable),  and  it  was  difficult   to  observe  corrosion.                                                                   
Additionally,  the pipes  were not regulated  by the  federal                                                                   
government. At that  point there was no state  in the country                                                                   
regulating  that  type  of pipeline.  Subsequently,  DEC  had                                                                   
implemented  regulations  relating  to  a  corrosion  program                                                                   
that industry  would have to  maintain. The legislature  also                                                                   
allocated  5  PCNs  and  about  $600,000  for  the  pipeline,                                                                   
corrosion, and integrity  program. The department  had done a                                                                   
risk  assessment  with  some  outside  consultants,  hired  5                                                                   
engineers,  and had  developed the  inspection program.  Over                                                                   
the past  few years,  as industry  had developed its  program                                                                   
and DEC  did field and records  inspection and review  of the                                                                   
industry's  corrosion  maintenance  program  for  the  three-                                                                   
phased  lines,  it  started looking  like  items  were  being                                                                   
duplicated  in  some  areas. The  department  had  looked  at                                                                   
efficiencies  and had  determined  it could  let  two of  the                                                                   
engineers  go  without  hindering the  effectiveness  of  the                                                                   
program.  He was comfortable  that letting  the positions  go                                                                   
was not  creating more  risk. He noted  that the  program was                                                                   
more about DEC  reviewing the industry's program  rather than                                                                   
DEC operating a  side-by-side program and trying  to do field                                                                   
2:08:49 PM                                                                                                                    
Representative Gara  discussed that for the past  three years                                                                   
the  legislature  had  heard  from  Kristin  Ryan  [director,                                                                   
Division of  Spill Prevention  and Response] that  DEC's food                                                                   
inspection  program  was not  at  a  level where  the  public                                                                   
could feel  safe that food  inspections were  being conducted                                                                   
to prevent illness.  He recalled that it had  already been at                                                                   
a level that  was not particularly safe. He  asked for detail                                                                   
on the program at present.                                                                                                      
Commissioner Hartig  replied that Ms. Ryan had  formerly been                                                                   
the environmental  health director  prior to moving  to SPAR.                                                                   
He explained  that the statements  had been largely  based on                                                                   
federal  guidelines  for  the frequency  of  inspections  for                                                                   
high  and lower-risk  facilities.  He explained  that  Alaska                                                                   
had  always been  below the  federal  guideline level.  Going                                                                   
back  five  years or  more  the  department reported  to  the                                                                   
legislature  that the  state was  behind federal  guidelines,                                                                   
but  getting  to   the  guideline  level  would   require  an                                                                   
additional  30  PCNs,  which   was  unlikely  to  occur.  The                                                                   
department   had  started   looking  at   whether  it   could                                                                   
concentrate  on the  higher risk  facilities and  to look  at                                                                   
other  ways   to  deal  with   the  lower  risk   facilities.                                                                   
Subsequently,   the  department   had   either  changed   its                                                                   
regulations to  exclude regulation  of lower risk  facilities                                                                   
or  it did  inspections less  frequently.  He confirmed  that                                                                   
there was more  risk to the public than in the  past, but the                                                                   
department  focused on  higher  risk facilities.  Related  to                                                                   
food  safety, lower  risk  facilities  included places  where                                                                   
there  was  not  much  processing  of  the  food  (e.g.  pre-                                                                   
packaged  food from  vendors)  bake  sales, or  other  places                                                                   
where  it would  be easy  to determine  the  origin and  stop                                                                   
continued contamination  if a person became ill.  Higher risk                                                                   
facilities included  a significant amount of  food processing                                                                   
and mass  distribution where  it was  difficult to  track who                                                                   
was  eating the  food and  how to  fix it  if something  went                                                                   
wrong. He  added that  communities could  step in  to provide                                                                   
oversight  in  the lower  risk  situations,  but he  did  not                                                                   
believe they  would have the  capacity. He concluded  that it                                                                   
came  down  to  working  on  increased  public  outreach  and                                                                   
education on steps they could take to lower food risk.                                                                          
2:12:31 PM                                                                                                                    
Representative  Gara wondered if  the program was  adequately                                                                   
protecting  public safety.  He wondered  what the  department                                                                   
was going  to inform  people of  in terms  of how  to protect                                                                   
Commissioner  Hartig answered  that informing  the public  on                                                                   
ways   to  protect   itself   included   basic  things   like                                                                   
communicating  to  keep  food  cold  or warm  if  needed  and                                                                   
washing hands prior to serving food.                                                                                            
Representative   Gara  asked   if   the  program   adequately                                                                   
protected  public safety.  Commissioner  Hartig replied  that                                                                   
he would  like the program  to do more,  but he  believed the                                                                   
department  was  doing a  good  job  related to  higher  risk                                                                   
things. He  believed it was important  to be vigilant  and to                                                                   
keep pushing  out information  to the public  and to  rely on                                                                   
the public related to the lower risk situations.                                                                                
Co-Chair Neuman  noted that the  state would have to  do less                                                                   
in many areas due to less funds.                                                                                                
Representative  Pruitt referred  to slide  23 related  to the                                                                   
department's position  history. He referred to  the decreased                                                                   
number of  positions between  FY 15 and  FY 16 and  asked how                                                                   
many positions had been vacant.                                                                                                 
THOMAS   CHERIAN,   DIRECTOR,  DIVISION   OF   ADMINISTRATIVE                                                                   
SERVICES,   DEPARTMENT    OF   ENVIRONMENTAL    CONSERVATION,                                                                   
answered  that   the  department  had  eliminated   about  25                                                                   
positions  through the  budget process;  15 of the  positions                                                                   
had  been vacant  and 10  had  been filled  by employees.  He                                                                   
relayed that  the department had  known it would have  to lay                                                                   
off staff  so it  had held  a number  of positions  vacant in                                                                   
order to keep from firing employees.                                                                                            
Representative  Pruitt asked for  the vacancy percentages  in                                                                   
FY 15  and FY  16. Mr.  Cherian answered  that  in FY 15  the                                                                   
department had a  13 to 15 percent vacancy  rate; the vacancy                                                                   
rate in  FY 16  was slightly  over 8  percent. He added  that                                                                   
the department's  budget  contained a  built-in vacancy  of 7                                                                   
percent.  He  relayed  that  the  current  vacancy  rate  was                                                                   
slightly over  the budgeted  vacancy, but  they still  had to                                                                   
maintain it to live within the budget.                                                                                          
Representative  Pruitt assumed  that the  vacancy factor  for                                                                   
FY 17 was maintained at about 8 percent.                                                                                        
Mr.  Cherian  answered  that the  department  would  have  to                                                                   
maintain  a vacancy rate  of 7  to 8  percent to live  within                                                                   
the budget even in FY 17.                                                                                                       
Representative  Pruitt  remarked   that  the  committee  kept                                                                   
hearing  from the  departments  that  FY 07  and  FY 17  were                                                                   
about  the  same.  He asked  what  the  department's  vacancy                                                                   
factor had been  in FY 07. He wanted to know  if it was truly                                                                   
looking at an apples-to-apples comparison.                                                                                      
Mr.  Cherian answered  that the  department  was required  to                                                                   
maintain a vacancy  rate of 7 percent. He  elaborated that it                                                                   
was  an apples-to-apples  comparison. He  spoke about  laying                                                                   
off about 47 positions  between FY 15 and FY  17; 7 positions                                                                   
would be reduced in FY 17 and 40 between FY 15 and FY 16.                                                                       
2:17:49 PM                                                                                                                    
Representative  Pruitt clarified  that he  was interested  in                                                                   
the  vacancy  factor in  FY  07.  He  explained that  if  the                                                                   
vacancy factor  had been 7  or 8 percent  in FY 15 it  was an                                                                   
apples-to-apples  comparison.   He  made  it   clear  he  was                                                                   
interested in getting the information from all departments.                                                                     
Mr.  Cherian  replied   that  he  would  follow   up  on  the                                                                   
Representative Kawasaki  spoke about the  restaurant facility                                                                   
inspections  conducted by  the department.  He remarked  that                                                                   
Anchorage  was  the  only  municipality   that  did  its  own                                                                   
inspections;  Fairbanks  had done  inspections  in the  past,                                                                   
but  they had  stopped in  the late  1990s in  order to  save                                                                   
money,  given  that  DEC already  provided  the  service.  He                                                                   
asked if the  department conducted restaurant  inspections in                                                                   
Anchorage. Commissioner  Hartig believed Anchorage  conducted                                                                   
all of  its inspections. He would  follow up on  the question                                                                   
to confirm.                                                                                                                     
Representative  Kawasaki referred to  SPAR and the  change in                                                                   
fee  in  the past  year.  He  remarked  that the  charge  had                                                                   
appeared  on his  oil  bill  in the  fall.  He  asked if  the                                                                   
change was resulting in as much money as predicted.                                                                             
Commissioner  Hartig   answered  that  it  had   not  been  a                                                                   
complete  year since  the change  had  been implemented.  The                                                                   
estimate  had  been  $7.2  million to  be  collected  by  the                                                                   
response fund  from the 0.95 percent  on refined oil  and the                                                                   
$0.05 per  barrel charge; it would  be necessary to  have the                                                                   
Department  of Revenue break  out the  data to determine  how                                                                   
much the  new fee  was bringing  in. He believed  projections                                                                   
were  close to  what had  been  anticipated; although,  going                                                                   
forward he  was not sure the  state would be able  to collect                                                                   
as much on the  refined products as it had  thought. He would                                                                   
follow up with the information.                                                                                                 
Representative Kawasaki  asked if the additional  revenue had                                                                   
been included  when the  legislature had  passed its  budget.                                                                   
He  asked if  money would  come back  from the  FY 16  budget                                                                   
because the bill passed.                                                                                                        
2:21:02 PM                                                                                                                    
Commissioner Hartig asked for clarification.                                                                                    
Representative  Kawasaki  wondered  if  the  legislature  had                                                                   
budgeted for  the UGF and had  then passed a bill  that would                                                                   
also fund  the amount. He asked  there would be  money coming                                                                   
Commissioner Hartig  replied that there  may be a  surplus of                                                                   
about  $200,000 of  the amount  collected  in the  prevention                                                                   
account  that would  be related  to the  crude oil  surcharge                                                                   
and the  refined product 0.95  percent per gallon,  which had                                                                   
been  intended.  He explained  that  the  prevention  account                                                                   
money had to  be appropriated every year by  the legislature;                                                                   
it was  always subject  to appropriation.  He furthered  that                                                                   
it  had been  intended  to collect  a  little  extra for  the                                                                   
first  couple of  years because  as crude  oil declined,  the                                                                   
idea had  been that  the refined  product use would  continue                                                                   
to  rise.  He  explained  that   combined  with  the  surplus                                                                   
cushion  it  would   allow  the  prevention   account  to  be                                                                   
sustainable for about 10 years.                                                                                                 
Representative  Kawasaki  referred  to  better  alignment  of                                                                   
existing   fees  mentioned   on  slide   15.  He  asked   for                                                                   
verification that the fees were not set by statute.                                                                             
Commissioner Hartig  answered that by statute  the department                                                                   
had  to  be authorized  to  impose  a  fee and  the  statutes                                                                   
specified  the criteria  and limits.  The  actual number  was                                                                   
not set in statute.                                                                                                             
Co-Chair Neuman made a point related to meeting decorum.                                                                        
Representative Wilson  hoped to get  heating oil from  gas in                                                                   
the future,  which would  enable residents  to stop  paying a                                                                   
tax on  heating oil. She  had often  heard that DEC  had more                                                                   
stringent   regulations   than    the   federal   government,                                                                   
specifically  related  to  water permitting  and  the  mining                                                                   
industry.  She asked  which  regulations  the department  may                                                                   
have  that  were  more  stringent  than  what  was  federally                                                                   
required.  She  pointed  to  slide 12  and  asked  about  the                                                                   
"other" fund category.                                                                                                          
Commissioner Hartig  pointed to the  purple section of  a pie                                                                   
chart on slide  11. He elaborated that the  category included                                                                   
the   Clean   Air  Protection   Fund,   Capital   Improvement                                                                   
Projects,  interagency  receipts,  program  receipts,  Alaska                                                                   
Clean Water Fund, and Alaska Drinking Water Fund.                                                                               
Representative Wilson  referred to slide 12 and  how much UGF                                                                   
was   required   for   federal    funds.   She   pointed   to                                                                   
environmental  health and asked  how much  of the  figure was                                                                   
associated with matching funds and what had been left over.                                                                     
Commissioner  Hartig answered  that  in environmental  health                                                                   
the bulk of the  UGF money was related to  the Drinking Water                                                                   
Program  and Solid  Waste.  He  elaborated that  the  federal                                                                   
government  periodically issued  drinking water rules,  which                                                                   
were  applicable  to  public drinking  water  systems.  There                                                                   
were national  rules that  had to be  followed by  the people                                                                   
running  the drinking  water systems  to  protect the  public                                                                   
from various  contaminates. In  the past,  DEC would  come to                                                                   
the  legislature  and  communicate  it needed  primacy  of  a                                                                   
federal  rule  and  funds  to  implement  the  rule  to  help                                                                   
communities  meet  the  rule.   He  furthered  that  if  that                                                                   
process  did not  occur, the  federal grant  funds coming  in                                                                   
for water projects  would be cut off. He would  follow up; it                                                                   
was  a significant  amount  of federal  funds  that would  be                                                                   
lost. He explained  that unless the state had  primacy of the                                                                   
drinking  water  rules  it  would  not  receive  the  federal                                                                   
funding  coming in  for the  projects. He  could provide  the                                                                   
further detail.  The amount  of federal  funds that  would be                                                                   
lost was significant.                                                                                                           
2:27:16 PM                                                                                                                    
Representative  Wilson  was  trying  to  determine  what  the                                                                   
state was  required to  do and  why it  had taken primacy  of                                                                   
some of  the rules.  She knew  the state  had received  extra                                                                   
federal  funds  at  one  time,  but some  of  the  funds  had                                                                   
dwindled. She believed  the state was left  "holding the bag"                                                                   
needing  to  bring   everything  to  a  certain   level.  She                                                                   
reasoned that there  were many communities, which  would need                                                                   
a  tremendous amount  of  money for  the  work. She  wondered                                                                   
what the state  had to do and  why it had chosen  to do other                                                                   
Representative  Wilson pointed  to slide  22 related  to non-                                                                   
federally  required  programs.  She  thanked  the  department                                                                   
about loosening  up some regulations  related to  the farmers                                                                   
markets. She wanted  additional detail on how  much the state                                                                   
was paying for  the listed items such as solid  waste and how                                                                   
much GF was going towards the items.                                                                                            
Commissioner Hartig would follow up.                                                                                            
Representative  Gattis  spoke   to  how  many  employees  had                                                                   
actually  been  removed  from positions.  She  commended  the                                                                   
department  for   taking  higher  paid  staff   and  lowering                                                                   
positions.  As she  approached  budgets  she was  considering                                                                   
she looked  at pay ranges that  were not being  brought down.                                                                   
She  stated that  sometimes high  pay ranges  could be  worth                                                                   
two  people  based on  the  amount  of  money paid  out.  She                                                                   
observed that  the issue was  bigger than just  one position,                                                                   
it was  how much the position  had been worth.  She commended                                                                   
the department for cutting costs.                                                                                               
2:30:32 PM                                                                                                                    
AT EASE                                                                                                                         
2:31:56 PM                                                                                                                    
^FY 17  BUDGET OVERVIEW:  DEPARTMENT  OF LABOR AND  WORKFORCE                                                                 
HEIDI   DRYGAS,  COMMISSIONER,   DEPARTMENT   OF  LABOR   AND                                                                   
WORKFORCE  DEVELOPMENT  (DLWD),   began  by  recognizing  the                                                                   
significant  amount of work  the budget  process was  for the                                                                   
committee  and the  departments.  She thanked  the  committee                                                                   
for its effort,  questions, and thoughtfulness.  She provided                                                                   
a   PowerPoint   presentation   titled   "FY2017   Department                                                                   
Overview,  House Finance  Committee" dated  January 29,  2016                                                                   
(copy  on file).  The  department's  mission was  to  protect                                                                   
workers  and   advance  opportunities  for   employment.  The                                                                   
department accomplished  the mission through its  key program                                                                   
priorities of  protecting Alaska's workers  through statutory                                                                   
assistance and  enforcement; developing an  Alaskan workforce                                                                   
for  Alaska's  jobs;  and  income  replacement  for  injured,                                                                   
unemployed, and disabled workers.                                                                                               
Commissioner     Drygas    addressed     the     department's                                                                   
organizational  chart on  slide  3. The  chart organized  the                                                                   
department  by   key  priority   program.  The   Division  of                                                                   
Employment  and   Training  Services  and  the   Division  of                                                                   
Vocational  Rehabilitation  both  had sections  that  crossed                                                                   
priority program lines, which was indicated on the chart.                                                                       
2:34:12 PM                                                                                                                    
Commissioner  Drygas spoke  to the protection  of workers  on                                                                   
slide 4.  The department had  continued to provide  workplace                                                                   
safety  consultation  and  enforcement,  which  kept  workers                                                                   
safe   and   reduced   workers'   compensation   costs.   The                                                                   
department  was proud that  its efforts  had resulted  in the                                                                   
second lowest workplace  lost-time and injury  rate on record                                                                   
in  FY  15  at 0.89  per  100  employees.  She  had  recently                                                                   
requested  information  from   the  state's  Risk  Management                                                                   
Division regarding  the rate of workplace injuries  for state                                                                   
employees and had  been alarmed by what she  had learned. She                                                                   
elaborated that  in FY  14 the state  spent over  $27 million                                                                   
on workers'  compensation claims  and $28  million in  FY 13.                                                                   
She   had  followed   up  with   a  letter   to  each   state                                                                   
commissioner   offering   occupational  safety   and   health                                                                   
consultation  to lower  the incidents  of workplace  injuries                                                                   
and the  associated costs  to the  state. The department  was                                                                   
also taking  on worker misclassification. She  furthered that                                                                   
the  department's occupational  safety  and health,  workers'                                                                   
compensation,  unemployment  insurance,  and  wage  and  hour                                                                   
staff  continued  to  implement  reforms  to  crack  down  on                                                                   
worker  misclassification   including  a   multi-departmental                                                                   
memorandum  of understanding  establishing  a working  group.                                                                   
The  achievements translated  into higher  wages and  greater                                                                   
income security for Alaska's workers.                                                                                           
Commissioner  Drygas  addressed  the Alaska  Labor  Relations                                                                   
Agency  under the  commissioner  and Administrative  Services                                                                   
(slide  5).  She  reported  that the  agency  had  a  minimal                                                                   
number  of staff  to facilitate  the  resolution of  disputes                                                                   
between  organized labor  and  public employers.  Within  the                                                                   
Labor  Standards  and  Safety  Division, the  wage  and  hour                                                                   
administration    allocation   provided   consultation    and                                                                   
enforcement of Alaska's  wage and hour Alaska-hire  and child                                                                   
labor  laws.   She  elaborated  that  annually   the  program                                                                   
generated  more money than  it cost  to operate; the  revenue                                                                   
was deposited  directly  into the  UGF and  UGF paid for  the                                                                   
program. She communicated  that it would require  a statutory                                                                   
change  to  put  the  money  into  a  separate  account.  The                                                                   
mechanical  inspection  allocation conducted  inspections  to                                                                   
protect workers  by ensuring electrical,  mechanical, boiler,                                                                   
pressure  vessel,  and  other similar  code  compliance.  The                                                                   
costs  of  the   program  were  covered   by  fee-for-service                                                                   
revenue  that was  deposited into  a DGF  account, which  the                                                                   
program was paid  out of. The occupational  safety and health                                                                   
allocation   provided   consultation  and   enforcement   for                                                                   
occupational  safety  and  health.  The  UGF  supporting  the                                                                   
program  provided state  match to federal  funds. The  Alaska                                                                   
Safety  Advisory  Council  organized  the  governor's  annual                                                                   
safety  and  health  conference  in March.  The  program  was                                                                   
fully funded  by the revenue  it generated from  sponsorships                                                                   
and attendance fees.                                                                                                            
2:37:04 PM                                                                                                                    
Commissioner  Drygas  highlighted  workforce  development  on                                                                   
slide 6.  She relayed  that in  FY 15,  88 percent  of Alaska                                                                   
Vocational and  Technical Center's (AVTEC)  long-term (longer                                                                   
than  6 weeks)  program students  graduated (a  total of  341                                                                   
out  of  387 students);  the  graduation  rate  exceeded  the                                                                   
target graduation  rate of 80  percent set by the  Council on                                                                   
Occupational  Education (the accrediting  agency for  AVTEC).                                                                   
The  center  was  continuing on  a  healthy  graduation  rate                                                                   
trajectory.  Additionally, the  department  had revamped  the                                                                   
workforce development  system by  merging two divisions  into                                                                   
the  Division  of  Employment   and  Training  Services.  The                                                                   
merger   resulted    in   reduced   staffing    and   greater                                                                   
administrative  efficiencies, which had  allowed DLWD  to put                                                                   
more  money  out on  the  streets  as grants.  The  resulting                                                                   
savings  addressed   $337,000  of  the  department's   FY  16                                                                   
unallocated   reduction.    Meanwhile,   the    Division   of                                                                   
Employment  and Training  staff  won two  highly  competitive                                                                   
federal grants  that support  registered apprenticeship.  The                                                                   
funding  would  enable  the  department  to  help  build  the                                                                   
state's  healthcare  workforce  through  apprenticeships  and                                                                   
the new  4 to  6-week pre-apprenticeship  programs at  AVTEC.                                                                   
She highlighted  that the  new programs  would help  meet the                                                                   
high demand for entry-level healthcare occupations.                                                                             
Commissioner  Drygas  outlined workforce  development  budget                                                                   
detail  on  slide 7.  She  highlighted  that with  a  minimal                                                                   
level  of  staffing support  the  federally  mandated  Alaska                                                                   
Workforce Investment  Board (AWIB) provided  policy oversight                                                                   
of state  and federally  funded job  training and  vocational                                                                   
education  programs;  the board  was  funded  by programs  it                                                                   
oversaw.  She   pointed  to   the  employment  and   training                                                                   
services  category  and  addressed  workforce  services.  She                                                                   
relayed that  the workforce services allocation  administered                                                                   
Alaska's  job center  network and  the online  job bank.  She                                                                   
noted that  the department  would not have  to close  any job                                                                   
centers  in  FY  17.  The  workforce  development  allocation                                                                   
comprised  all  of  the  department's  workforce  development                                                                   
grant programs,  including the State Training  and Employment                                                                   
Program, Technical  and Vocational  Education Program,  pass-                                                                   
through  grants  to  regional   training  centers,  federally                                                                   
funded  Workforce  Innovation  and Opportunity  Act  programs                                                                   
and  UGF pass-through  grants  for programs  like the  Alaska                                                                   
Construction   Academies.   She  addressed   the   vocational                                                                   
rehabilitation  category  and  relayed that  client  services                                                                   
assisted Alaskans  with disabilities  to secure  and maintain                                                                   
employment. The  special projects  allocation consisted  of a                                                                   
few  federal grants  with some  state  matching funds,  which                                                                   
provided  employment services  to individuals  with the  most                                                                   
significant disabilities  to enter  or retain employment  and                                                                   
to  provide  technology related  assistance  for  individuals                                                                   
with disabilities.                                                                                                              
Commissioner   Drygas   addressed   the   Alaska   Vocational                                                                   
Technical Center  on slide 7. The center  provided vocational                                                                   
and  technical  training  to prepare  Alaskan  residents  for                                                                   
2:40:18 PM                                                                                                                    
Commissioner  Drygas  turned to  slide  8 related  to  income                                                                   
replacement.  The  department   saw  an  improvement  in  the                                                                   
timeliness  of  unemployment insurance  (UI)  claims  payment                                                                   
with 94.3 percent  of claims paid within 21  days versus 91.7                                                                   
percent  in  the prior  year.  She  detailed that  UI  claims                                                                   
continued  to be processed  at a  rate exceeding the  federal                                                                   
benchmark  of 87  percent. She  moved  to income  replacement                                                                   
program  detail on  slide 9.  She addressed  the Division  of                                                                   
Workers' Compensation,  which aided Alaskans  with employment                                                                   
related  injuries   by  administering  the   Alaska  Workers'                                                                   
Compensation   Act,  the  Fishermen's   Fund,  the   Workers'                                                                   
Compensation  Benefits Guaranty Fund,  and the Second  Injury                                                                   
Fund.  The Workers'  Compensation  Appeals  Commission was  a                                                                   
separate  division under  the  department,  but was  included                                                                   
for  budgetary purposes.  She  detailed  that the  commission                                                                   
adjudicated  appeals  from  disputed   Workers'  Compensation                                                                   
Board  decisions. She  furthered  that  legislation had  been                                                                   
introduced in both  bodies to repeal the commission  and move                                                                   
the appeals back to the courts.                                                                                                 
Commissioner   Drygas  addressed   employment  and   training                                                                   
services  on slide  9.  The UI  allocation  paid benefits  to                                                                   
eligible  unemployed workers,  in addition  to assessing  and                                                                   
collecting  employer   and  employee  contributions   to  the                                                                   
Unemployment  Trust  Fund, the  State  Training  Unemployment                                                                   
Program,   and  the   Technical   and  Vocational   Education                                                                   
Program.   She  moved   to  the   vocational   rehabilitation                                                                   
category  and  relayed that  the  disability  determination's                                                                   
allocation   provided   timely    adjudication   of   medical                                                                   
determinations  for persons alleging  a disability  under the                                                                   
Social Security Act.                                                                                                            
2:42:20 PM                                                                                                                    
Commissioner   Drygas  addressed   the  department's   FY  16                                                                   
operating budget  on slide 10.  The department's  overall UGF                                                                   
reduction was  $7.6 million or  nearly 23 percent.  She added                                                                   
that  the total  included  DLWD's  share of  the  unallocated                                                                   
reduction  totaling  approximately $418,000.  To  accommodate                                                                   
the  reductions  the  department   had  focused  considerable                                                                   
efforts  on reducing  administrative  and overhead  expenses.                                                                   
She  listed where  the  reductions  had been  allocated.  The                                                                   
Commissioner's   Office  and   Administrative  Services   had                                                                   
eliminated   10   positions    including   the   department's                                                                   
communications  coordinator  at   a  reduction  of  $600,000.                                                                   
Additionally,  the department  had  put considerable  efforts                                                                   
into  lease consolidation.  She noted  that department  staff                                                                   
had  been  moving  a  lot.  Leased  space  had  already  been                                                                   
reduced  in  Juneau and  Kenai  and  the efforts  had  helped                                                                   
address  $81,000  of  the  department's   FY  16  unallocated                                                                   
reduction.  Currently  efforts  were  focused  on  Anchorage,                                                                   
which  would  result  in  a  savings  of  about  $100,000  in                                                                   
reduced   leased   costs   in  2017.   The   department   had                                                                   
consolidated  the Division of  Business Partnerships  and the                                                                   
Employment   Security   divisions   into  the   Division   of                                                                   
Employment  and  Training  Services;  the  consolidation  had                                                                   
covered  $337,000  of  the  department's  FY  16  unallocated                                                                   
reduction. She  reiterated her  earlier testimony  that AVTEC                                                                   
had refocused  its Allied  Health programs  away from  state-                                                                   
funded longer-term  programs to  short-term federally  funded                                                                   
programs    for    high   demand    entry-level    healthcare                                                                   
2:44:16 PM                                                                                                                    
Commissioner  Drygas   addressed  slide  11   titled  "FY2017                                                                   
Budget: $165,530.8."  The governor's  requested FY  17 budget                                                                   
for  DLWD totaled  $165.5 million;  52 percent  of the  total                                                                   
was funded by  federal money. The department's UGF  in the FY                                                                   
17  budget  totaled  $23.9  million,   which  was  down  $1.9                                                                   
million  from  the  current  year.  The  department  had  806                                                                   
employees; the  number was down  by 209 employees  since 2012                                                                   
(an average reduction  of 40 employees per  year). Changes to                                                                   
the department's  budget included reducing the  amount of UGF                                                                   
supporting its  lease cost by  $100,000 and reducing  AVTEC's                                                                   
reliance  on UGF  by  nearly $75,000  (slide  12). She  added                                                                   
that  DLWD  had  proposed  a  regulation  change  to  AVTEC's                                                                   
tuition and  fees in  order to offset  the reductions  in UGF                                                                   
and  to cover  increasing operating  costs.  She stated  that                                                                   
the  increase  was  overdue  given   that  long-term  program                                                                   
tuition  had not been  increased since  2010. The  department                                                                   
was  reducing  the UGF  supporting  the  Alaska  Construction                                                                   
Academies   by  $600,000  in   accordance  with   legislative                                                                   
intent.   The   Independent    Living   program   was   being                                                                   
transferred   to  the   Department  of   Health  and   Social                                                                   
Services;  there  was  a  corresponding  executive  order  to                                                                   
clean  up the  statutory  references  to the  program  within                                                                   
DLWD. The  department reflected  the merger  of the  Business                                                                   
Partnerships  and Unemployment  Security  Divisions into  the                                                                   
Division  of   Employment  and   Training  Services   in  the                                                                   
operating budget;  there was a corresponding  executive order                                                                   
to  clean  up the  statutory  references  to  the  Employment                                                                   
Security Division.                                                                                                              
2:46:06 PM                                                                                                                    
Commissioner  Drygas  continued  to  address  slide  12.  The                                                                   
department  was reversing  the FY 16  UGF salary  adjustments                                                                   
in  an  unallocated  lump  sum   of  approximately  $235,000.                                                                   
Depending  on legislative  actions, the  plans could  change,                                                                   
but  the decrement  would be  spread  across allocations  the                                                                   
same way  the original  salary adjustments  had been  spread.                                                                   
The change  resulted in  reduced supply purchases,  equipment                                                                   
replacement   and   staff   training,   and   further   staff                                                                   
reductions  across  the  agency,   which  would  have  direct                                                                   
service   implications.   She  relayed   that   DLWD  had   a                                                                   
spreadsheet  reflecting how  the reduction  would be  spread,                                                                   
which  it  would use  to  work  with its  legislative  budget                                                                   
Commissioner Drygas  moved to slide 13 and  addressed 10-year                                                                   
projection  chart   generated  by  the   Legislative  Finance                                                                   
Division  (LFD). The  chart illustrated  the  changes in  the                                                                   
department's  GF  budget  since  FY  07. She  noted  that  GF                                                                   
encompassed both  UGF and DGF on the chart.  The department's                                                                   
DGF  included  the  State  Training  and  Employment  Program                                                                   
(STEP),  the  Technical  and   Vocational  Education  Program                                                                   
(TVEP),  and  revenue  generated  by fees  for  service.  The                                                                   
majority of  the department's increase  since FY 07  had been                                                                   
in the  DGF area.  For example,  STEP and  TVEP increased  by                                                                   
$6.7  million   due  to  legislative  changes   and  Alaska's                                                                   
growing workforce.                                                                                                              
Commissioner Drygas  moved to an  LFD chart on slide  14 that                                                                   
she  found slightly  confusing.  She noted  that while  total                                                                   
personal  services expenses  increased by  $6.1 million  over                                                                   
the  timeframe   (FY  07  to   FY  17),  DLWD   had  actually                                                                   
experienced  a loss of  231 employees  during that  time. The                                                                   
increase  was due  to  wage  and benefit  adjustments,  which                                                                   
included increasing healthcare benefit costs.                                                                                   
Commissioner  Drygas  turned  to  an LFD  chart  showing  the                                                                   
department's  budget by  division  (all funds)  on slide  15.                                                                   
The  big  changes  in  FY  17  resulting  from  the  division                                                                   
consolidation made  the chart confusing; therefore,  DLWD had                                                                   
prepared  another  chart,  which   combined  the  two  merged                                                                   
divisions  over  the  entire  time  period  (slide  16).  The                                                                   
federal  funding  within  the   Division  of  Employment  and                                                                   
Training  Services  (top  line)   made  it  the  department's                                                                   
largest  and  most volatile  division.  The  federal  funding                                                                   
going into  the division  was cyclical;  funding levels  were                                                                   
higher  when   unemployment  was  high.  She   detailed  that                                                                   
unemployment was  currently lower and funding  had decreased.                                                                   
She  relayed  that  when  employment  and  training  services                                                                   
funding  had  been  at  its  peak  in  FY  10,  the  national                                                                   
unemployment   rate  had   been  10   percent  and   Alaska's                                                                   
unemployment  rate had been  8 percent (shown  at the  top of                                                                   
the  chart  on  slide (slide  16).  Currently,  the  national                                                                   
unemployment  rate  was  5  percent   and  Alaska's  was  6.5                                                                   
percent; therefore funds had decreased.                                                                                         
Commissioner   Drygas   addressed   a   chart   showing   the                                                                   
department's GF  by division (slide 17). She  reiterated that                                                                   
on the  chart the  term GF  included UGF  and DGF.  She noted                                                                   
that due  to division  consolidation the  chart was  a little                                                                   
hard  to  follow.  The  department   had  generated  a  chart                                                                   
combining  the two  merged  divisions  over the  entire  time                                                                   
period (slide 18).  The top line represented  the Division of                                                                   
Employment  and Training Services  (the department's  largest                                                                   
division). The  decrease in  the division  shown in FY  15 to                                                                   
FY 16  was primarily  due to the  elimination or  significant                                                                   
reduction   to   the  department's   UGF   funded   workforce                                                                   
development  grants,  including   reductions  to  the  Alaska                                                                   
Construction  Academy  of over  $800,000;  regional  training                                                                   
centers  of  nearly  $700,000;  and the  elimination  of  the                                                                   
Alaska  Youth First,  Compass  Alaska,  Career and  Technical                                                                   
Education,  and Oil  and  Gas training  funds  at about  $2.5                                                                   
2:50:40 PM                                                                                                                    
Co-Chair  Neuman  pointed  to   slide  9  related  to  income                                                                   
replacement.  He wondered when  the last  time the  costs had                                                                   
been reviewed.  Commissioner Drygas deferred the  question to                                                                   
her colleague.                                                                                                                  
PALOMA   HARBOUR,   DIRECTOR,  DIVISION   OF   ADMINISTRATIVE                                                                   
SERVICES,  DEPARTMENT  OF LABOR  AND  WORKFORCE  DEVELOPMENT,                                                                   
replied  that the  Workers' Compensation  program was  funded                                                                   
by a  few on workers'  compensation premiums;  the percentage                                                                   
was a relative  percentage of workers'  compensation premiums                                                                   
and changed each year.                                                                                                          
Co-Chair Neuman  asked if the  legislature set the  rates for                                                                   
the 5  different funds on  slide 9.  He asked how  the monies                                                                   
came in.                                                                                                                        
Ms. Harbour  answered that the  Second Injury Fund  was based                                                                   
on actual  incidents and  paid benefits  based on  demand for                                                                   
the  service.  There   was  a  fee  paid  by   all  employers                                                                   
(separate  from  workers' compensation  premiums);  the  fund                                                                   
was self-sustaining  and the amount  fluctuated based  on the                                                                   
actual benefit  payments. The  Workers' Compensation  Benefit                                                                   
Guarantee  Fund was  funded by  fines on  employers that  did                                                                   
not comply  with the Workers'  Compensation Act;  revenue was                                                                   
generated  by collecting  the  fines. She  detailed that  the                                                                   
fund paid  benefits to the injured  workers who did  not have                                                                   
workers'  compensation  coverage  but  should  have.  Revenue                                                                   
going   into  the   Fishermen's  Fund   was  generated   from                                                                   
commercial  fishing licenses  and  paid  benefits to  injured                                                                   
fishermen; the  percentage changed  every so often.  The only                                                                   
program with anything  but benefit payments was  the Workers'                                                                   
Compensation   program   that   administered   the   Workers'                                                                   
Compensation  Act, which conducted  investigations  to ensure                                                                   
employers  were  compliant.  The  cost  was  paid  for  by  a                                                                   
percentage  of  the  premiums.  She did  not  know  that  the                                                                   
amount had  been looked at since  2006, but she  would follow                                                                   
up to confirm her answer.                                                                                                       
Co-Chair  Neuman spoke  to  an effort  to  ensure that  funds                                                                   
were available  for the  department to do  its job.  He asked                                                                   
Commissioner  Drygas  to  make   suggestions  to  the  budget                                                                   
finance  subcommittee   (Representative  Wilson,   chair)  on                                                                   
things that could  be changed if they had not  been looked at                                                                   
in   a  while.   Commissioner   Drygas   answered  that   the                                                                   
department  would  be happy  to  work on  the  issue and  had                                                                   
continued  to   do  so.  She   noted  that  there   had  been                                                                   
conversations  on  the  topic  the past  year  during  budget                                                                   
discussions,  which the  department had  taken seriously  and                                                                   
would continue to work on.                                                                                                      
2:54:26 PM                                                                                                                    
Co-Chair Neuman  referred to  slide 10 related  to the  FY 16                                                                   
operating  budget.  He  pointed  to  information  that  AVTEC                                                                   
Allied Health  programs had been refocused  from state-funded                                                                   
longer-term  programs   to  federally-funded   apprenticeship                                                                   
type  programs. He  wondered what  state-funded programs  the                                                                   
department was referring to.                                                                                                    
Commissioner Drygas  answered that the state's  Allied Health                                                                   
program had  previously been a  very popular  program located                                                                   
at  the Muldoon  AVTEC campus  that had  mainly consisted  of                                                                   
registered   nurses  and  licensed   practical  nurses.   She                                                                   
explained  that  the  program  had  been  very  expensive  to                                                                   
operate  per  student,  which  had relied  heavily  on  state                                                                   
funding; there had  also been some private  funding involved.                                                                   
When  the state  funding  had been  cut,  the private  sector                                                                   
could  not  pick  up the  slack  for  the  diminishing  state                                                                   
funds.  One  of  the department's  concerns  was  related  to                                                                   
duplication.  She elaborated  that the  University of  Alaska                                                                   
Anchorage already  had a  terrific registered nurse  program,                                                                   
although  there was a  significant waitlist.  She pointed  to                                                                   
the  need for  more  entry-level  healthcare  workers in  the                                                                   
state;  it  was an  area  that  had significant  turnover  in                                                                   
Alaska, which impacted the quality of healthcare services.                                                                      
Commissioner  Drygas continued  that  department had  decided                                                                   
to  revamp and  refocus the  Allied Health  program at  AVTEC                                                                   
with   grant    money   to   help   startup    a   healthcare                                                                   
apprenticeship  and pre-apprenticeship  program with  a focus                                                                   
on entry-level  healthcare  occupations; there  were 9  or 10                                                                   
positions  including  a  behavioral   health  aid.  The  pre-                                                                   
apprenticeship  program exposed  young people, veterans,  and                                                                   
underemployed individuals  to the healthcare field.  The hope                                                                   
was to  alleviate some  of the  turnover. She explained  that                                                                   
frequently  someone went  into  the healthcare  field and  it                                                                   
ended  up not  being  what  they wanted  to  do  at all.  The                                                                   
program  was much  less  expensive  to administer;  the  seed                                                                   
money  was  from federal  funds  and  the  goal was  for  the                                                                   
program  to  be  self-sufficient.   She  furthered  that  the                                                                   
program  would   help  individuals  determine   whether  they                                                                   
wanted  to do  that kind  of work,  which  was difficult  and                                                                   
strenuous.  From  that  point,   individuals  could  possibly                                                                   
transition  into the  apprenticeship programs.  She cited  an                                                                   
apprenticeship   program  at   Providence   Hospital  as   an                                                                   
example;  there  were  other   healthcare  institutions  with                                                                   
programs  as  well. The  program  needed  a place  where  the                                                                   
curriculum  already  existed  and  was working  to  create  a                                                                   
consortium  to get  the healthcare  program  off the  ground.                                                                   
She noted that  it was coming together very well  so far. She                                                                   
reiterated    that   it   would    move   Alaskans    through                                                                   
apprenticeship  programs  on  a career  pathway.  She  stated                                                                   
that a  person would  begin in  an entry-level position,  but                                                                   
there were  plenty of places to  advance. The purpose  of the                                                                   
program   was   aimed  at   improving   Alaska's   healthcare                                                                   
Co-Chair  Neuman  understood   the  purpose  of  the  nursing                                                                   
program.  He  noted  that  he   would  never  have  become  a                                                                   
professional  mechanic  or  woodworker  if he  had  not  been                                                                   
exposed to  the professions in  high school. He spoke  to the                                                                   
high occurrence  of individuals being trained  for a position                                                                   
on the job  and then leaving  because they did not  enjoy the                                                                   
work. He  thought getting  exposure to  different trades  was                                                                   
very important. He  asked if the department  planned to reach                                                                   
out to  companies  and businesses  to ask  them to help  fund                                                                   
some of the training programs.                                                                                                  
Commissioner  Drygas answered  that the  department had  many                                                                   
partners   in  the  endeavor,   including  the   Southcentral                                                                   
Foundation,    several    joint    apprenticeship    training                                                                   
committees,  Providence  Hospital,  and others.  The  process                                                                   
was a  very collaborative  effort. Currently,  it was  funded                                                                   
by  federal grant  money specifically  for  the program.  The                                                                   
department did  not want to  have a federally  funded program                                                                   
that  would   eventually  require  state  funding   into  the                                                                   
future.  She  understood  that  it  would  not  work  in  the                                                                   
current budget environment.  The idea was to  use the federal                                                                   
seed money  to develop  the consortium,  which was  underway.                                                                   
There  would  be  funding  mechanisms,  which  could  include                                                                   
employers paying  in to keep the  program going, much  like a                                                                   
joint  apprenticeship   training  community  would   do  with                                                                   
registered  apprenticeship  program funding.  The  department                                                                   
was  working  on  curriculum   and  would  try  to  get  some                                                                   
instruction going in March or April [2016].                                                                                     
3:00:46 PM                                                                                                                    
Co-Chair Neuman  remarked that  several years earlier  he had                                                                   
worked  on   legislation  related  to  vocational   education                                                                   
credits  where  companies  could  receive  credits  from  the                                                                   
state towards  corporate income  taxes if they  donated money                                                                   
to  help with  vocational  education. He  asked  Commissioner                                                                   
Drygas to highlight details.                                                                                                    
Commissioner   Drygas  answered   that  the  department   had                                                                   
received specific  donations from companies; it  had recently                                                                   
received  a donation  from  Superior  Energy for  $5  million                                                                   
worth  of equipment.  She  elaborated  that the  company  was                                                                   
closing its  offices in Anchorage  and was donating  a marine                                                                   
simulator  and several  pieces of  computer and  construction                                                                   
equipment  to AVTEC. She  noted that  the donation  could not                                                                   
come at  a better time due  to a significant number  of aging                                                                   
computers  and other  items at  AVTEC. She  was very  pleased                                                                   
with the  donation and  believed they  would put every  piece                                                                   
of  equipment  to  work.  Additionally,  donations  had  been                                                                   
received from  Saltchuk in the  amount of $60,000.  She noted                                                                   
there were other  donations that she would have  to follow up                                                                   
on. She  liked the  idea of doing  some innovative  funding -                                                                   
perhaps  giving   a  company  a  tax  credit   for  employing                                                                   
registered  apprenticeships. She  noted  that several  states                                                                   
were  looking  at the  concept  and  she believed  there  was                                                                   
currently legislation  in Congress. She spoke  to encouraging                                                                   
businesses to  engage in  apprenticeship programs,  which she                                                                   
believed was  a healthy  economic model.  She would  be happy                                                                   
to  look  at  the  idea in  the  future  or  in  the  current                                                                   
session. She believed it was a great idea.                                                                                      
Co-Chair  Neuman spoke  to legislation  he had  worked on  in                                                                   
the  past  that   would  provide  a  50  percent   credit  on                                                                   
corporate  taxes for  the first  $100,000 and  a 100  percent                                                                   
credit  on the  second $100,000  donation to  a high  school.                                                                   
The catch had  been that because it had fallen  under federal                                                                   
tax code under  defined public benefit, the  donator was also                                                                   
eligible  for an  additional $69,000  in  federal credits;  a                                                                   
company   could   get   $219,000  credits   on   a   $200,000                                                                   
contribution  into  vocational  education.  The  contribution                                                                   
went  directly to  schools to  teach  vocational trades  that                                                                   
were representative  of the  companies' industries.  He added                                                                   
that it  also allowed schools  to receive endowments  legally                                                                   
under state  law. He spoke  to the importance  of encouraging                                                                   
private  industry   to  try   to  help  increase   vocational                                                                   
education opportunities.                                                                                                        
3:04:17 PM                                                                                                                    
Commissioner Drygas  believed it was an  interesting concept,                                                                   
which  she was  willing to  look  into. She  believed it  was                                                                   
almost  more tangible  to have  some  skin in  the game.  She                                                                   
elaborated  that a company  could receive  a tax credit  when                                                                   
they showed  the state the numbers  - when they  actually had                                                                   
used  training programs  and  had registered  apprentices  on                                                                   
their books.  She noted that  there were terrific  statistics                                                                   
about  how registered  apprenticeship improved  the lives  of                                                                   
individuals  and   grows  a  workforce  in  any   state.  She                                                                   
remarked that  she thought of apprenticeship  as construction                                                                   
- she  had gone  to a White  House apprenticeship  conference                                                                   
in September  [2015] and  had been blown  away by  the models                                                                   
of apprenticeship  that were  completely beyond  construction                                                                   
(e.g.  mining,   healthcare,   insurance,  and  other).   She                                                                   
continued  that there  were terrific  models  used in  Europe                                                                   
that utilized  registered apprenticeship to  help individuals                                                                   
determine  their career  paths. She  believed it  would be  a                                                                   
great way to  encourage the use of registered  apprenticeship                                                                   
for any  number of industries.  Currently the  department was                                                                   
focusing  on  increasing  the  state's  healthcare  workforce                                                                   
through  registered apprenticeship,  but it  did not  plan to                                                                   
stop there.                                                                                                                     
Representative  Wilson commended  the department for  finding                                                                   
efficiencies  in   leasing  and  other.  She   remarked  that                                                                   
besides  matching  funds  the  department  used  grants.  She                                                                   
spoke  to uses for  the grants  on things  like AVTEC,  adult                                                                   
education,  GEDs, and  the  Construction  Academy. She  noted                                                                   
that all other  budgetary items received matching  funds. She                                                                   
talked  about giving  grants to  schools the  state had  been                                                                   
giving  grants  to because  they  were  there. She  spoke  to                                                                   
efforts  to be  more efficient  on  utilizing the  University                                                                   
and DLWD.  She believed the  department was taking  the lead,                                                                   
especially  on the courses  they had  discussed, and  letting                                                                   
the  University be  the academics.  She believed  it was  how                                                                   
better programs  were found. She  spoke to concern  about out                                                                   
of  work individuals  and believed  it  was the  way to  keep                                                                   
them going.  She was proud  the department had  found federal                                                                   
funds to  start something  the state had  not done in  a long                                                                   
time. She  believed growth  would occur  in DLWD by  locating                                                                   
funds that specifically fit the department.                                                                                     
3:07:35 PM                                                                                                                    
Vice-Chair  Saddler   pointed  to  slide  12   related  to  a                                                                   
reduction to the  Construction Academy by $600,000.  He asked                                                                   
how  the reduction  had impacted  the  operation. He  thought                                                                   
the intended audience of the academy had been retargeted.                                                                       
Commissioner  Drygas  replied  that the  budget  subcommittee                                                                   
would   continue   to   address   the   Alaska   Construction                                                                   
Academies.  She believed  it was  important and  was a  large                                                                   
part  of the  department's  budget.  She explained  that  the                                                                   
academies  had worked  hard to  increase  the donations  they                                                                   
received (e.g.  donated space,  instructors, and  equipment),                                                                   
which they  had to  rely on more  heavily given  the decrease                                                                   
in state funding.  The reduction had forced  the academies to                                                                   
operate at a much leaner level than in the past.                                                                                
Representative  Munoz asked  how the  funding worked  for the                                                                   
construction academy.  She asked  if funds went  to secondary                                                                   
and postsecondary  schools. Commissioner Drygas  replied that                                                                   
the funds  went to postsecondary  adult education as  well as                                                                   
high  school  students  for  exposure   to  the  construction                                                                   
trades.  She  deferred  the  question   to  Ms.  Harbour  for                                                                   
further detail.                                                                                                                 
Ms.  Harbour  expounded  that  in  FY  14  one-third  of  the                                                                   
funding had  gone to adult  training and two-thirds  had gone                                                                   
towards   secondary  education.   In   the   past  year   the                                                                   
department had retargeted  and had taken the  majority of the                                                                   
$800,000 reduction  from FY 16 at the secondary  level (based                                                                   
on direction  given to  the department  to focus on  adults).                                                                   
She stated  that at  present about half  of the  funding went                                                                   
to adult education and half went to schools.                                                                                    
Representative   Munoz  asked   if   the  proposed   $600,000                                                                   
reduction would jeopardize any of the current programs.                                                                         
Commissioner  Drygas answered  that  the answer  was not  yet                                                                   
known. She  believed that  the Alaska Construction  Academies                                                                   
was a policy  question. The subcommittee had  been discussing                                                                   
whether  it was  the purview  of  DLWD to  have funding  that                                                                   
went   towards   high  school   students   for   construction                                                                   
training.  She  believed  it absolutely  was.  She  expounded                                                                   
that  the  department  could   not  fulfill  its  mission  of                                                                   
training workers  if it did  not provide young  Alaskans with                                                                   
exposure  to the construction  industry.  She opined  that it                                                                   
was  vitally  important.  She  continued  that  schools  were                                                                   
doing  some of  the  work,  but construction  academies  were                                                                   
picking  up  a significant  amount  of  the work  to  provide                                                                   
students with  an opportunity  to try  the trades.  She spoke                                                                   
to the  aging workforce in  the construction  industry; there                                                                   
would be some  significant problems heading into  the future,                                                                   
especially  as the state  looked at  building a gasline.  The                                                                   
department  had  worked on  several  presentations  regarding                                                                   
its  Oil and  Gas  Workforce Development  Plan,  specifically                                                                   
targeted   to   gasline  workforce   development.   She   was                                                                   
concerned that  as funding was  ratcheted back it  would make                                                                   
the  department's  job much  more  difficult  because it  was                                                                   
necessary  to  build  up  the  workforce;  it  did  not  just                                                                   
happen. She  believed it was  critical to expose  individuals                                                                   
to the trade as early as 7th or 8th grade.                                                                                      
3:12:32 PM                                                                                                                    
Representative Edgmon  pointed to the  photo on slide  19 and                                                                   
asked for  detail. He  wondered if  there were other  similar                                                                   
opportunities  with the Department  of Corrections  (DOC) and                                                                   
other correctional facilities.                                                                                                  
Commissioner Drygas  replied that the women in  the photo had                                                                   
been  incarcerated  at  the  Highland  Mountain  Correctional                                                                   
Center. The women  had engaged in a program,  which she could                                                                   
have her  colleague provide  information  on if desired.  She                                                                   
communicated  that the department  did significant  work with                                                                   
the  Highland Mountain  Correctional Center.  She noted  that                                                                   
there  were  some   terrific  women  at  the   facility.  She                                                                   
elaborated  that the department  had been  tasked with  doing                                                                   
its  part to  reduce recidivism  in  Alaska. She  paraphrased                                                                   
Governor Bill  Walker's statement  that when  a person  had a                                                                   
job  they tended  to  commit fewer  crimes.  She stated  that                                                                   
when a person had  a job they had something to  do, had self-                                                                   
worth, and had  a purpose - all of which  reduced recidivism.                                                                   
She would  love to expand  programs like the  one highlighted                                                                   
on slide  19. She pointed to  a great collaboration  with the                                                                   
iron workers  apprenticeship program  with Highland  Mountain                                                                   
Correctional Center,  which she would love to  expand, but it                                                                   
was a  matter of locating  funds. She  concluded that  it was                                                                   
the type of work that really mattered.                                                                                          
Representative   Edgmon  asked   if  the  Highland   Mountain                                                                   
Correctional  Center offered  advantages  for the  department                                                                   
to do  programs like  the one  highlighted on  slide 19.   He                                                                   
had  heard   a  reference  (possibly   from  DOC   staff)  to                                                                   
advantages of moving  the inmates to the  Palmer Correctional                                                                   
Commissioner  Drygas  could  not   speak  to  the  difference                                                                   
between  the  Palmer and  Highland  Correctional  Facilities.                                                                   
One  of the  reasons  the  department  was engaged  with  the                                                                   
incarcerated  individuals at  Highland was  because they  are                                                                   
women.  One of the  things the  department  was trying  to do                                                                   
through  several initiatives  was to increase  the number  of                                                                   
women and  minorities in  the construction  industry  as well                                                                   
as an apprenticeship.                                                                                                           
3:15:43 PM                                                                                                                    
Representative  Gara  turned  to  slide 18.  He  asked  about                                                                   
employment   and    training   services   related    to   the                                                                   
Construction  Academy.  He  observed  there  had  been  a  $5                                                                   
million cut  from the prior fiscal  year from $23  million to                                                                   
$18  million. He  remarked that  $800,000 had  been cut  from                                                                   
the Construction Academy the previous year.                                                                                     
Commissioner  Drygas answered  that  the  reduction had  been                                                                   
$835,800  from the  Construction  Academy.  There were  three                                                                   
regional  training centers  that  received  UGF funds,  which                                                                   
had been  cut in half to  $678,300. Additionally,  the Alaska                                                                   
Youth First  Compass Alaska, Career and  Technical Education,                                                                   
and  Oil  and  Gas Training  Grants  programs  had  all  been                                                                   
eliminated at a total of $2.4 million.                                                                                          
Representative  Gara asked  if  the cut  to  the Youth  First                                                                   
program had  occurred the  previous year  or the year  before                                                                   
that.  Ms.  Harbour  answered  that  two  years  earlier  the                                                                   
program had been  cut in half and funded as  a one-time item.                                                                   
The program had then ended in FY 15.                                                                                            
Representative  Gara referred  to the  three grants  that had                                                                   
been cut  the prior year. He  noted that Youth First  and Oil                                                                   
and Gas  Training  grants had  been cut. He  asked about  the                                                                   
third program.                                                                                                                  
Commissioner Drygas  answered that the third program  was the                                                                   
Career and Technical Education program.                                                                                         
Representative Gara  asked for the total for  the three grant                                                                   
cuts.  Commissioner Drygas  replied  that the  total cut  was                                                                   
Representative  Gara  understood  the  proposal  to  cut  the                                                                   
Construction  Academy  by  another  $600,000  in  the  coming                                                                   
year.  He asked  if there  were  any other  proposed cuts  to                                                                   
training in the  coming year. Commissioner Drygas  replied in                                                                   
the negative.                                                                                                                   
Representative  Gara asked  how  much had  been remaining  in                                                                   
the  Youth   First  program  the   previous  year   that  was                                                                   
subsequently cut. Commissioner Drygas replied $1.4 million.                                                                     
Representative  Wilson  spoke  to the  Construction  Academy.                                                                   
She asked  if it  would be  a benefit  to have  a grant  that                                                                   
could be  tailored to changing  programs instead of  having a                                                                   
pass-through   grant   for  one   industry   (i.e.   nursing,                                                                   
restaurant,  and  others).  She elaborated  that  there  were                                                                   
many  other   career  paths  outside  of   construction.  She                                                                   
remarked  that  a  significant  amount  of  the  construction                                                                   
unions had  their own apprenticeships.  She asked  what would                                                                   
the  benefit of  limiting the  grant  to construction  versus                                                                   
tailoring  the program  to be  more like  the State  Training                                                                   
Employment  Program  where  a   grant  could  go  to  provide                                                                   
training in many different areas.                                                                                               
3:20:08 PM                                                                                                                    
Commissioner  Drygas answered that  the idea was  interesting                                                                   
and  she   believed  it  was   a  policy  question   for  the                                                                   
legislature. She  believed the Construction Academy  was good                                                                   
because   there  was   an   existing  structure   in   place.                                                                   
Additionally,  there   was  a  need  for   more  construction                                                                   
workers  in the  state,  especially as  the  state geared  up                                                                   
towards  building  one  of  the  largest  projects  in  North                                                                   
America  [gasline]. She  hesitated to  say that  it would  be                                                                   
prudent  to move  the money  someplace else  at present.  She                                                                   
was not trying  to say that the mining  industry, healthcare,                                                                   
or fisheries  industries  were not important.  There  were so                                                                   
many places that  needed focus; the department  was taking on                                                                   
one chunk at  a time. She reiterated her hesitation  at doing                                                                   
something else with  the funding or using it as  a fund to do                                                                   
all  types of  different  programs. She  would  love to  have                                                                   
more  funding  for   things  like  that,  but   she  did  not                                                                   
anticipate receiving  additional funds. She relayed  that the                                                                   
Alaska  Construction  Academy   model  was  a  good  one;  it                                                                   
exposed individuals  to the construction trades.  Many of the                                                                   
adults or high  school students receiving the  exposure, went                                                                   
on  to healthy  careers  in  the construction  industry.  She                                                                   
stated  that  the  academy  was a  terrific  feeder  for  the                                                                   
construction industry that she would be remiss to cut off.                                                                      
Representative  Wilson agreed  that  it was  a good  program.                                                                   
She  reasoned that  if the  academy  was that  good it  would                                                                   
have  the ability  to compete  for  funds competitively.  She                                                                   
stated  that it  would be  a policy  decision  about why  the                                                                   
state  was favoring  one group  over all other  needs  in the                                                                   
state. She  stated that  it was a  pass-through grant  and it                                                                   
was  difficult  to  measure.   She  reiterated  that  if  the                                                                   
program  was  competitive  and  able  to  meet  the  criteria                                                                   
funding  would not  be discontinued,  but  others would  also                                                                   
have the  same opportunity. She  remarked that she  wanted to                                                                   
expose  high  school   students  to  all  kinds   of  trades;                                                                   
however,  the   larger  policy  question  was   whether  DLWD                                                                   
continued  to do what  it was  doing and send  a bill  to the                                                                   
Department  of Education  and  Early Development  or  schools                                                                   
for  partial  payment.  She remarked  that  schools  had  CTE                                                                   
funding within  the education foundation formula.  She stated                                                                   
that it was  not really about whether the  state believed the                                                                   
opportunity  should be  in the  high  schools -  it was  more                                                                   
about  who  paid. She  noted  that  the discussion  would  be                                                                   
continued  in  subcommittee.  She  reasoned  that  it  was  a                                                                   
broader policy  call about where  services belonged  when one                                                                   
department  could  not get  the  money  from their  area  and                                                                   
hoped  another  department would  take  it  on. She  was  not                                                                   
saying the  Construction  Academy was  bad, but she  believed                                                                   
the  state was  basically favoring  one  group over  another.                                                                   
She  remarked that  the  state brought  in  employees to  the                                                                   
seafood and  mining industry for  very high paying  jobs. She                                                                   
spoke about a  DLWD trends report, which  showed construction                                                                   
was falling  off because  there  was not funding  for  it; it                                                                   
was  not  a  large  demand  compared   to  other  areas.  She                                                                   
stressed that the  state's children were missing  out on high                                                                   
paying jobs.                                                                                                                    
3:24:45 PM                                                                                                                    
Vice-Chair Saddler  noted that the jobs that  would come from                                                                   
the gasline were not in the short-term time horizon.                                                                            
Representative   Gara  stated  that   he  did  not   see  the                                                                   
Construction  Academy as favoring  construction workers  over                                                                   
other people;  he saw it  as all that  was left.  He detailed                                                                   
that  the Youth  First Program  had been  deleted, which  had                                                                   
addressed  the  goal  of  getting youth  into  all  sorts  of                                                                   
careers. He countered  that the legislature was  not favoring                                                                   
construction; the  academy was all that remained  out of what                                                                   
used to be a  much bigger job training pipeline.  He asked if                                                                   
there was  a significant portion  of private funding  for the                                                                   
Construction Academy.                                                                                                           
Commissioner  Drygas answered  that  it had  always been  the                                                                   
case  that  private  funds  were  primarily  donated  to  the                                                                   
Construction Academy  in the form of  equipment, instructors,                                                                   
and space from school districts.                                                                                                
Representative  Gara asked  for information  about the  Youth                                                                   
First  program that  had been  eliminated.  He recalled  that                                                                   
the  program   had  enabled   students   to  meet  with   job                                                                   
counselors  to help  them locate  available resources,  which                                                                   
would  enable  them   to  get  into  professions   they  were                                                                   
interested in.                                                                                                                  
Ms. Harbour replied  that there had been two  different parts                                                                   
to the  Youth First program. A  portion had gone  through the                                                                   
job  centers for  employees to  work directly  with youth  to                                                                   
interest    them   in    different   career    opportunities.                                                                   
Additionally,  there  had  been  competitive  grants  awarded                                                                   
annually for  youth training  activities. For example,  there                                                                   
had been  a healthcare academy  at the King Career  Center in                                                                   
Anchorage that had  been funded with the grants.  She did not                                                                   
recall all of the work related to the healthcare academy.                                                                       
Vice-Chair Saddler  discussed the schedule for  the following                                                                   
3:27:39 PM                                                                                                                    
The meeting was adjourned at 3:27 p.m.                                                                                          

Document Name Date/Time Subjects
House Finance DOLWD Overview 01-29-2016.pdf HFIN 1/29/2016 1:30:00 PM
HFC- DEC Overview 01.29.16 (reduced file size).pdf HFIN 1/29/2016 1:30:00 PM
HFIN DOLWD Overview 1-29-2016 Inquiry Responses.pdf HFIN 1/29/2016 1:30:00 PM
Enclosure to HFIN DOLWD Overview Letter.pdf HFIN 1/29/2016 1:30:00 PM